The European Central Bank's record low interest rates are not getting to those who need them most because of huge differences in banking conditions across the euro zone, ECB Vice President Vitor Constancio said on Monday.
He said this fragmentation was "severely disrupting" the spread of benefits from the low rates. The ECB kept rates at a record low of 0.75 per cent on Thursday but acknowledged that the euro zone's strains meant those ultra-low borrowing costs were not being passed on to firms and consumers in the bloc's trouble spots.
"At present, market fragmentation is severely disrupting the transmission of ECB monetary policy," Constancio said."In some countries, changes in our main interest rates are being passed through by banks but in others, because bank funding is tight, interest rates changes are being passed through hardly at all."
Speaking to reporters after the speech Constancio said one of the things ECB members discussed last week in regards to the fragmentation problem was that recent changes to its lending rules were not being fully utilised by banks in struggling countries.
"The question is that this credit claim programme we introduced is not yet fully used in all countries that could benefit from it, so we are working on seeing that it can become more effective."
In his speech Constancio had used the broader problem to highlight the potential benefit of euro zone plans being drawn up to prevent a repeat of current financial crisis.
